The G7 nations have reached an agreement to exempt American and British companies from certain aspects of a global minimum tax deal. This decision was announced in a statement released by Canada, the current G7 president. Under the new “side-by-side” proposal, U.S. companies will only be taxed on their domestic and foreign profits in their home country.
This exemption is due to existing U.S. minimum tax rules, which address concerns raised by the U.S. Treasury Secretary regarding the OECD/G20 Inclusive Framework on BEPS Pillar 2 rules. The side-by-side system aims to provide stability and certainty in the international tax system while encouraging dialogue on digital economy taxation and preserving countries’ tax sovereignty.
G7 side-by-side tax proposal
The removal of Section 899 from the Senate version of the bill has led to a shared understanding that the side-by-side system could help maintain progress made by jurisdictions within the Inclusive Framework in combating base erosion and profit shifting. The United Kingdom has also welcomed the removal of Section 899, as British businesses previously expressed concerns about facing higher taxes due to the measure. G7 officials emphasize the importance of collaboration and are committed to finding a solution that is acceptable and implementable for all parties involved.
Former U.S. President Donald Trump had previously declared that the 2021 global corporate minimum tax agreement would not apply in the United States and threatened retaliatory taxes on countries implementing the global tax rules against U.S. firms. The G7’s new side-by-side tax proposal represents a significant step in ongoing international tax discussions, aiming for a fair system that benefits both domestic and international economies.
